Montana should impose strict education-spending limits in wealthy
communities as part of a broader plan to equalize expenditures among
school districts, the state's new Republican Governor has
recommended.

In addition, said Gov. Stanley G. Stephens in his first State of the
State Message, lawmakers should earmark lottery proceeds for teacher
retirement, authorize a new statewide property tax for the same
purpose, and allot the funds through the school-funding formula in a
manner that would help close the gap between high- and low-spending
districts.

The Governor and the legislature are expected to devote much of
their time this year developing new a school-finance system. Last
January, a state trial court declared the existing system
unconstitutional and ordered the state to have a new, equitable funding
scheme in place by Oct. 1.

The Montana supreme court is not expected to issue its ruling on the
state's appeal in the case until well into the legislative session. Key
lawmakers, however, predict the high court will uphold the decision and
therefore are assuming they will be forced to change the system this
year.

Spending Levels Frozen

Mr. Stephens's proposal to "cap the amount of money school districts
spend to provide a basic education" would essentially freeze spending
levels in districts with high property values, according to Ray
Shackleford, the Governor's budget director. Schools, he explained,
would be categorized "by size and type," and local school boards would
be prohibited from spending above a specified amount per pupil in each
category.

"This is a measure that has been talked about for some time," said
Robert Anderson, executive director of the Montana School Boards
Association. The spending limits, he said, would force the state to
significantly increase its share of school revenues, which has declined
dramatically in recent years while reliance on local property-tax
revenues as a funding source has increased.

Teacher Retirement

Mr. Stephens also proposed "to uncomplicate an arcane system of
funding" by drastically revising the way the state finances its
teacher-retirement program.

Under his plan, the retirement system would be incorporated into the
state's school-foundation program. Current county property taxes for
retirement would be replaced with a uniform 20-mill state property tax,
and those funds would be distributed on an equalized basis through the
foundation formula.

The Governor also suggested that all lottery profits be dedicated
for teacher retirement and distributed through the foundation formula.
The lottery currently generates about $8 million a year, which is used
to support retirement programs for both teachers and other state
employees.

In a statement that won support from the school-boards association,
Mr. Stephens said he would oppose legislation that would erode local
control of education or require districts to consolidate.

That stance is significantly different from that of the former
governor, Ted Schwinden, who had offered several consolidation
proposals during his tenure, said Mr. Anderson.

"It's the right move," he added. "No savings are to be made by
consolidating districts."

Advisory Group's Proposals

In addition to Mr. Stephens's proposals, lawmakers are expected to
consider a finance-reform plan prepared by the Public School Advisory
Council, a group that was formed by Mr. Schwinden.

In a report issued late last year, the council suggested that the
state increase its share of school revenues and limit the ability of
districts to raise their property-tax rates above the state-mandated
base rate.

Representative Ted Schye, chairman of the House education committee,
said he supported Mr. Stephens's plan to limit the growth of wealthy
districts' budgets.

"If you're going to have equalization, you have to have caps or
we'll be in the same mess again in 10 years," he said.

He added, however, that he does not think the Governor's overall
plan will fully satisfy the state court's requirements.

Mr. Schye said several bills to revise the finance system will be
introduced in coming weeks. In the meantime, he said, state officials
are "working hard to get all the education players together to figure
out what they can get a consensus on."

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